Mexico's Newest TV Drama Is a Bid to Block a Third Broadcaster

By ELISABETH MALKIN

Published: December 6, 2006

Night after night for almost two weeks, Mexican television news has shown expos?on how poor people suffer from the high cost of medicines.

The images of the ill and dying have been heart-wrenching. Legislators lament the lack of regulation. Corner pharmacies barely fend off failure. The new health minister concedes that high prices are a problem.

It may be merely a coincidence that Mexico's two competing television companies, Televisa and TV Azteca, have each chosen to focus on this particular social problem at the same time.

Their separate reporting comes to exactly the same conclusion. The culprits who drive the prices so high are two pharmaceutical distributors who together control 70 percent of the market. And both news teams single out the same one for particular opprobrium: Grupo Casa Saba, a $2 billion company controlled by the reclusive octogenarian billionaire Isaac Saba Raffoul.

What neither Televisa nor TV Azteca mentions is that Mr. Saba has his eye on another business: television.

Mr. Saba is the Mexican partner of Telemundo, the NBC Universal unit that is the No. 2 Spanish-language television broadcaster in the United States. In September, Telemundo and another company Mr. Saba owns, Grupo Xtra, formally requested a license for a broadcast television network.

Both Televisa and TV Azteca say that their coverage is driven only by news judgment. ''The high cost of medicines in a poor country with great health needs is a real issue, and it is not related to Saba and his other businesses,'' said Manuel Compean, a spokesman for Televisa.

Jorge Sanchez, a spokesman for Casa Saba, denied any accusations of price-gouging and pointed to profit margins of less than 10 percent on the company's balance sheet.

Within weeks, the license request set off a nasty dispute between Telemundo and TV Azteca, leading to lawsuits and countersuits. Last week, Telemundo asked the Federal Communications Commission in the United States to deny the renewal of the broadcasting license to KAZA, the Los Angeles affiliate of Azteca's growing network based in the United States. The dispute comes just as Felipe Calder?akes office as president. Mr. Calder?who campaigned on a promise to increase competition, has said that Mexico should have a third broadcast company.

The decision over whether to authorize a new network, which would be awarded by public auction, could prove to be the new government's first big test when it comes to taking on powerful business interests.

Many parts of Mexico's economy are controlled by just one or a few companies that have succeeded in keeping out competition.

Televisa and TV Azteca control almost the entire broadcast television industry in Mexico, although Televisa is much larger, with about 75 percent of the advertising market. Last April, they won passage of a law that critics say gives them free space on the broadcast spectrum.

That law created a public uproar that has heightened pressure for more competition. ''There has to be at least one more open television channel,'' said Mexico's top antitrust regulator, Eduardo P?z Motta, in an interview. Last week, he called on the government to auction off more spectrum quickly.

But both Televisa and TV Azteca declare that they are ready and willing to compete. ''Televisa has competed historically and competes every day in all of its businesses,'' Mr. Compean of Televisa said.

For Telemundo, the effort to gain a distribution platform for its programming is simply a question of equality. Televisa, the world's largest Spanish-language media company, distributes its popular telenovelas and reality shows through a licensing agreement with Univision, the top Spanish-language network in the United States.

TV Azteca is creating its own American network through agreements with stations in cities with large Spanish-speaking populations.

''The point is pretty basic,'' said Donald Browne, Telemundo's president. ''We want to do the same thing in Mexico that Televisa and TV Azteca do in the United States. They are able to distribute in the United States, and we would like to have an opportunity to distribute our own product.''

He added, ''We're looking for just a reasonable playing field -- not even even -- just to be able to show our product in Mexico.''

The bad blood between Telemundo and TV Azteca particularly goes back more than a dozen years, when NBC first tried to enter the Mexican market. A deal with TV Azteca that would have allowed NBC to take a small stake in the company fell through after TV Azteca backed out, arguing that NBC did not hold up its side of the deal to provide programming and technical assistance.

A dozen years later, the dispute is even more bitter. After Telemundo hired a well-known producer, Alan Tacher, for its talent show ''Quincea?,'' in which 14- and 15-year-old girls live together as they study with voice and dance coaches, TV Azteca argued that it had an exclusive contract with him.

Azteca won an injunction from a Mexican judge to stop production, and Azteca lawyers accompanied the police on a raid on the studio where Telemundo was filming one of the final episodes. The production was eventually moved to Miami.

The raid is one of the main arguments in NBC's filing last week with the F.C.C. It accuses TV Azteca of strong-arm tactics against Telemundo's operations in Mexico to prevent it from ''competing lawfully against TV Azteca in its own country.''

The filing also raises the long-running fraud case against TV Azteca's controlling shareholder, Ricardo Salinas Pliego, filed by the Securities and Exchange Commission in January 2005. Mr. Salinas Pliego first delisted TV Azteca's shares from the New York Stock Exchange and settled with the S.E.C. last September, paying a fine of $7.5 million.

Rick Cotton, NBC Universal's general counsel, said, ''If participation in the Mexican marketplace is foreclosed by the actions of TV Azteca in particular, then participation by TV Azteca in the U.S. marketplace needs to be re-examined by U.S. regulatory authorities.''

TV Azteca saw the NBC filing as a direct attack. ''We are outraged,'' Azteca America's chairman, Luis J. Echarte, said in an e-mail message. ''The filing has no legal fundamentals and is clearly a media ploy that attempts to damage the reputation of TV Azteca and its subsidiaries in the U.S., and put pressure on the Mexican government into auctioning new television licenses.''

The networks, meanwhile, can point to one accomplishment with their series on drug prices. Mexico's antitrust commission plans to begin an investigation into the market for distributing pharmaceuticals.

Photos: A feud between the broadcasters TV Azteca and Telemundo led Azteca to seek to block production of Telemundo's talent show ''Quinceañera,'' above. At left, the police and lawyers for TV Azteca outside the show's studios. (Photos by Telemundo)